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Introduction

As the airline industry rebounds from the severe disruptions caused by the covid pandemic, Delta Airlines (DAL) has distinguished itself as a standout performer, recording a robust 37% price increase year-to-date, surpassed only by United Airlines at 43%. Recognized by That Points Guy as the best airline for five consecutive years, Delta Airlines' focus on service reliability and satisfaction has cemented the company as an industry favorite amongst both travelers and employees. By leveraging its favorable position in the minds of travelers with strategic operational efficiencies, network expansion and innovative engagement initiatives, DAL has positioned itself advantageously for continued growth in a recovering travel market.

We use EarningsEdge.ai ‘s sentiment and behavioral analysis models to analyze DAL’s Q2 2023 earnings report (reported on July 13th). These cutting-edge, event-driven AI models augment the traditional analysis process by providing unprecedented perspectives based on objective data – uncovering previously hidden insights into the company’s future trajectory. Based on our analysis, we believe there is plenty of fuel left in the tank from DAL’s recent rally.

Sentiment Analysis

Our sentiment analysis model critically evaluates each statement from DAL’s Q2 2023 earnings call transcript, calculating a sentiment score (ranging from +100 to -100) that represents the statement’s perceived impact on the company’s future expected performance. We then aggregate these individual statement scores into an overall sentiment score for the entire earnings event, reflective of the underlying value in the company’s future prospects. DAL’s Q2 2023 earnings scored +68 on our sentiment analysis – indicating a moderate to strong positive outlook for the company following this event. This positive score was driven by record-setting operational outperformance, financial discipline, and a keen understanding of the shifting travel environment. DAL reported record revenue and its highest quarterly earnings in the company’s history, increasing EPS by more than 90% from last year. DAL also generated over $1 billion in free cash flow, which will allow them to substantially repay existing debt – resulting in interest savings more than $100 million greater than previously expected. The resurgence of global travel markets has bolstered demand for airlines, driving volumes and marginal prices higher. DAL’s keen understanding of the environment within which it operates has enabled the company to capitalize on these macro headwinds. Management’s discipline to reinvest this windfall into the operational and financial resiliency of the company gives us confidence in the company’s long-term sustainability.

Top 5 Key Impact Statements from DAL’s Q2 2023 Earnings Event

Sequential quarter-over-quarter changes in overall sentiment scores are a critical indicator for short-term volatility. DAL’s +68 sentiment score for Q2 2023 is a +29-point improvement from the prior quarter, a near 2x increase in sentiment that highlights the strategic measures DAL has implemented to enhance profitability, deliver value for its shareholders, and capitalize on macro-opportunities. This strong, sequential increase indicates a rising sentiment pattern with the potential for short- and long-term outperformance.

Behavioral Analysis 

Our first-of-its-kind Behavioral Analysis AI model extracts the raw audio and video* from an earnings call to analyze the CEOs vocal patterns and micro facial expressions. We track more than 30 unique emotional states against a baseline behavioral profile to detect even the most subtle variations and anomalies in behavioral patterns and correlate these fluctuations to specific topics of interest for investors. To efficiently understand the CEO’s overall behavioral demeanor during the earnings call, we aggregate the raw emotional intensity data into four categories (positive affect, negative affect, uncertainty, and engagement). The scores for each of these categories range from 0 to +100 and represent the underlying emotions’ intensity as a percentage of all emotions observed. For example, an Positive Affect score of +50 indicates that positive behavioral responses account for 50% of the total responses throughout the entire earnings call, a positive indicator. During DAL’s Q2 2023 earnings call, CEO Edward Bastian displayed Positive Affect of +46.9, Negative Affect of +6.6, Uncertainty of +4.6, and Engagement of +41.9. Positive Affect significantly higher than both Negative Affect and Uncertainty is a positive indicator for DAL’s outlook. In addition, we found no significant deviation from our standardized baseline speaker profile for Mr. Bastian, emphasizing consistency and transparency in his communications. We also conducted a deep dive analysis into each of the individual emotions that our model tracks, looking for any rapid elevations in behavioral intensity. Corroborating the importance of our sentiment analysis findings, we observe the largest spike in enthusiasm as CEO Edward Bastian reports the company’s EPS results: “This marks the highest quarterly earnings result in our history, an achievement that moves Delta beyond recovery and firmly on a great path forward.” Interestingly, there is only one moderate elevation in Negative Affect emotions distress and anxiety, both of which occurred as Mr. Bastian commented on the operating environment of last June, when the airline industrybecame overwhelmed by consumer demand that vastly outstripped available supply. From our in- depth sentiment and behavioral analysis of the Q2 2023 earnings event, we find the company has managed these challenges well and, as a result, has positioned itself favorably amongst the competition.

Potential Downside Risks

While our DAL analysis points toward continued outperformance, investors should be weary of potential risks that could temper our positive outlook for the stock. The rapid post-covid surge in demand has given rise to supply chain bottlenecks, a concern flagged in the key impacts statements by our sentiment analysis model: “At the same time, aviation infrastructure is still fragile, and the industry continues to face multiple constraints across the supply chain, aircraft delivery delays and training needs. We also note that the recent increase in oil prices and the potential for a traditionally slower travel season could result in inflated airfare prices that deter potential travelers, negatively impacting DAL’s outlook. While these potential challenges are real, DAL’s strong free cash flow equips them with the resources needed to navigate a challenging macro environment. Lastly, with a more than 37% year-to-date return, there is some valuation risk. While our analysis highlights positive operational and financial developments that we believe will continue to fuel the company’s outperformance, there is risk of investor profit-taking in the short-term. Prudent investors should monitor and evaluate these headwinds carefully before making any investment decisions. 

Overall Recommendation 

EarningsEdge.ai’s comprehensive sentiment and behavioral analysis of DAL’s Q2 2023 points to a moderate to strong positive outlook for the stock, fueled by the company’s operational excellence, financial discipline, and keen understanding of the environment within which it operates. DAL’s strong positioning amongst domestic airlines will enable the company to continue to capitalize on strong macro headwinds in the airlines industry. In the event of a less than favorable macro environment, we draw confidence from the company’s robust (and continually improving) balance sheet and proven track record in navigating challenging macro environments.